Unemployment worries jump to highest level since 2020 in New York Fed survey

The Federal Reserve Bank of New York on Monday released its latest Survey of Consumer Expectations, which found that Americans’ expectations of the labor market have dimmed to the lowest level since the COVID-19 pandemic.

Respondents’ expectations that the unemployment rate will be higher one year from now jumped 4.6 percentage points to 44% in March – the highest reading since April 2020. The increase was broad-based across age, education and income groups.

The perceived probability of losing one’s job in the next 12 months increased by 1.6 percentage points to 15.7%, which is the highest level since March 2024. That increase was largest for respondents with annual household incomes below $50,000.

Respondents’ level of confidence about the probability of finding a job if they lost their current job decreased slightly by 0.1 percentage point to 51.1%.

FED CHAIR POWELL SAYS TARIFFS LIKELY TO CAUSE INFLATION TO RISE, COULD BE PERSISTENT

Consumers are also expecting that inflation will tick higher over the next year, with the survey finding that inflation expectations increased 0.5 percentage points to 3.6% at the one-year-ahead horizon. Inflation expectations were unchanged at 3% on the three-year-ahead horizon, and decreased slightly by 0.1 percentage point to 2.9% at the five-year-ahead horizon.

Expected year-ahead price growth for food rose 0.1 percentage point to 5.2%, its highest level since May 2024. It rose by 0.7 percentage point for the cost of medical care to 7.9%, while rent increased 0.5 percentage point for rent to 7.2%.

Year-ahead price expectations fell by 0.5 percentage point for gas to 3.2% and 0.2 percentage point for the cost of college education to 6.7%.

RECESSION FEARS, TARIFF UNCERTAINTY PROMPT PLUNGE IN CONSUMER SENTIMENT

Additionally, the survey found that households are finding it more difficult to get credit, as March saw a small increase in those who view their financial situation negatively. Households’ view of the probability that stocks will rise also dipped to its lowest level since June 2022.

The New York Fed’s report comes against the backdrop of mounting economic uncertainty as President Donald Trump is pursuing a reset of America’s trade policy, sparking a tit-for-tat trade war with major trading partners such as China, Canada, Mexico and the European Union.

Economists believe the import taxes will cause inflationary pressures to rise, as businesses typically pass on tariff costs to consumers through higher prices – though there is uncertainty over how much consumer prices will rise and for how long, given the administration’s efforts to negotiate more favorable trade terms.

Reuters contributed to this report.